The move is part of a larger plan by CEO David Ellison to spend and grow as he works to catch up in the race for streaming subscribers.
Less than two months after taking over Paramount, CEO David Ellison is signalling that he’s just getting started. The studio is now reportedly planning a bid for rival Warner Bros. Discovery, according to news previously reported by The Wall Street Journal and later confirmed by other outlets.
News of the possible acquisition has boosted Paramount’s stock price in the weeks since. Its stock is now up 27% over the past month and 79% year-to-date.
Paramount’s bid for Warner Bros. – a company that is more than twice Paramount’s size and did $10 billion more in revenue last year – hadn’t been submitted yet and could fall apart, according to the Journal. A report from CNBC noted that the offer could be between $22 and $24 per share. That would put the total cost of the purchase between $55 and $60 billion.
“It seems like they are taking advantage of having access to capital, which is not something that these legacy companies have had to a great extent recently, and building with a long-term focus,” said Matthew Dolgin, an analyst at Morningstar.
The deal would include a slate of cable channels like Cartoon Network and CNN, as well as a sprawling catalog of IP with film series like Looney Tunes, DC Comics, and Harry Potter. That catalog would be a huge get for Paramount, analysts say.
Buying Warner Bros would also give Paramount’s streaming app, Paramount+, a much-needed boost. The service has around 77 million subscribers, according to the company’s most recent filings, far behind the 125 million Warner Bro’s HBO Max boasts. Both services are dwarfed by Netflix, though, which is leagues ahead with around 300 million subscribers.
Kannan Venkateshwar, an analyst at Barclays, wrote in a note that a newly combined studio would be able to compete with larger players. “Paramount and Warner Bros. would in essence become the biggest studio in the world,” he wrote, wielding a “bigger and more diverse base of franchises than any studio including the likes of Disney.”
To survive in a world with fewer cable subscribers and theatregoers, media companies need to grow and merge. Dolgin said that Ellison is working to ensure that “Paramount will be one of the winners, because it could stand alone and be more in the driver’s seat, rather than at the mercy of how the industry might go.”
The Warner Bros. bid is just the latest in Ellison’s spending spree since taking over Paramount last month. Just days after the merger, Paramount announced it would spend more than $7 billion for the broadcast rights for UFC, a purchase that cost nearly as much as the entire Paramount deal. But Dolgin says that Ellison, backed by the deep pockets of his father, Oracle founder Larry Ellison, has the time and resources to focus on the long term.
“It’s building a media empire and ensuring that you are one of the few that can survive in a continually evolving industry,” Dolgin said.